How Much Would You Have for Retirement If You Saved $100 a Month?

Forgoing your employer's 401(k) plan is costing you.

Many Americans aren’t saving enough for retirement. But, how are you supposed to find extra money in your paycheck for retirement if you’re battling the rising costs of living and unprecedented levels of household debt?

Although it might seem like there’s no room in your budget for to save for retirement, even a little bit goes a long way. To help you see the power of putting aside a small sum for retirement each month, GOBankingRates determined how much you’d have if you put $100 in a 401(k) with an annual rate of return of 6.5 percent.

Click to See: How You Can Add $500,000 to Your Retirement Savings

Your Retirement Savings If You Save $100 a Month in a 401(k)

Saving $100 a month via a traditional route, such as a basic savings account, results in much lower retirement savings than in a 401(k). If you’re age 25, and have 40 years to save until retirement, depositing $100 a month into a savings account earning the current national interest rate of 0.10% APY would leave you with $48,974.93 in before-tax savings.

Retire Comfortably

A rather depressing figure is that 49 percent of employers with 401(k) plans match 0 percent of employee salary. But even with no match from your employer, the retirement savings you earn from a 401(k), with a slightly conservative rate of return of 6.5 percent — The Motley Fool found the rate of return to be 7 percent over the last five years — is considerably higher.

If you started putting your money into a 401(k) today at age 25 and saved for 40 years,  you’d have $272,214 saved by age 65 — and that’s with no employer contribution. But, if you received a 3 percent match from your employer, your 401(k) savings would jump to $408,321.

Take a look below at how much you’d have saved by 65 based on which age you started saving. The blue is based on calculations  assuming the employer match is zero, and the yellow is assuming you’re receiving a 3 percent match on your $100-a-month contribution, regardless of salary.

Retire Comfortably

saving for retirement

Age at Start of Investing Birth Year 401(k) Retirement Savings Savings With 401(k) Matching, 3%
25 1994 $272,214 $408,321
30 1989 $188,329 $282,494
35 1984 $128,080 $192,120
40 1979 $84,989 $127,483
45 1974 $54,338 $81,507
50 1969 $32,692 $49,038
55 1964 $17,550 $26,325
60 1959 $7,093 $10,640

Less frequent than no match is employers who match 50 cents on the dollar up to 6 percent of employee salary. The median match is 3 percent. Based on the same parameters above, you’d save approximately $408,321 by age 65 if you put away $100 month with a 3 percent employer match of your salary.

Click to See Why: 42% of Americans Will Retire Broke

How to Save for Retirement

A straightforward, if basic, way to increase your retirement savings is to increase your monthly contribution. For the purposes of this study, $100 contributed a month was used, for an annual contribution of $1,200.

You could certainly crank that up if you wish by contributing more depending on what your budget permits, contributing every paycheck and opting for your employer’s maximum contribution match.

Another strategy is to open and maintain several vehicles for retirement savings. For instance, you can have a 401(k) through your employer while at the same time contributing to an IRA outside of work. Plus, IRAs tend to offer a wider variety of investment options than the usual 401(k) plan.

Retire Comfortably

The good news is, retirement costs can be modified and reduced based on geography. The basic fact is that some states and cities have cheaper costs of living than others, better taxes on retirees, more affordable homes, or many other factors. Some states even tax Social Security, so where you choose to retire certainly affects how quickly you use up your savings.

Click through to see the best places to retire if you haven’t saved as much as you should.

More on Retirement Planning

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Methodology: GOBankingRates determined how much a person would have for retirement if they saved $100 a month first through a basic savings account, and second by using a 401(k). SmartAsset’s 401(k) calculator was used to determine how much savings one would have if they invested $100 every month until retirement, using the following constants (1) type of Account [401(k)], (2) annual contribution amount [$1,200, based on a $100 a month contribution], (3) current 401(k) balance [$0], (4) employer matches [0%], (5) annual income [$57,652, the median household income according to the Census Bureau 2017 American Community Survey], (6) annual rate of return savings [6.5%, based on slightly more conservative value than The Motley Fool’s 7 percent average], (7) marital status [single], (8) retirement age [65], and (9) life expectancy [78.6 years, the U.S. average according to the Center for Disease Control. These factors were then used for each birth year in the study to give a final total Retirement Savings. This figure was then spread out over the average thirteen years between retirement and death and taxed at the appropriate income level.

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About the Author

Andrew DePietro

Andrew DePietro is a finance writer with years of experience covering topics such as taxation, Social Security, entrepreneurship, investing, real estate and housing markets. His work has appeared on MSN, Yahoo Finance, Fortune, Forbes, CBS and U.S. News. Before writing for GOBankingRates, Andrew worked as a research assistant and graduated from the University of Pennsylvania with a degree in History.

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